Shares of Tega Industries Ltd. slipped nearly 3% to ₹2,020.70 on Wednesday, September 11, even after the company announced a big-ticket acquisition a day earlier. The stock, which had closed at ₹2,081.70 in the previous session, saw investors booking profits as concerns rose over the financial implications of the deal.
Acquisition of Molycop
On Wednesday, Tega announced that, in a consortium with Apollo Funds, it will acquire 100% stake in Molycop for an enterprise value of $1.5 billion (approx. ₹13,000 crore). The deal will be executed through a special purpose vehicle where Tega will hold 77% stake, with Apollo Funds owning the remaining 23%.
The scale of the acquisition stands out because it is almost equal to Tega’s current market capitalisation of ₹13,467 crore. Tega’s contribution will be $361 million (₹3,180 crore), which includes ₹995 crore via corporate debt and ₹2,184 crore through an equity raise.
Why the fall?
While the acquisition offers Tega synergies — with both companies catering to common customers in the mining and grinding solutions space — investors are wary of the financial risk. Notably, Molycop is 8x Tega’s size in terms of revenue, but operates at far lower margins. At an Enterprise Value to EBITDA multiple, Molycop trades at 9x, compared to Tega’s steep 41x, raising concerns about dilution and profitability.
The stock’s fall reflects near-term concerns over leverage, fundraising, and integration challenges, despite long-term growth prospects.
What’s next?
Tega has scheduled a board meeting on September 13 to consider fundraising proposals to support the acquisition. Market watchers will keep a close eye on the funding mix and impact on shareholder value.
